Brown Urges Crackdown On 'Tax Havens'

by Robin Pilgrim, LawAndTax-News.com, London

23 February 2009

UK Prime Minister Gordon Brown has spoken of his desire to implement stricter regulations against the use of 'tax havens' by multinationals.

Brown, who is thought to have the support of other world leaders, believes that tighter regulation will make it harder for business to make use of international tax-minimisation strategies; something he considers to be one part of the many-sided solution to the ongoing global recession.

Critics have been quick to point out however that a reduction in competition, and an increase in protectionism, are not viable or sustainable solutions to achieving a healthy global economy. On the same day that Gordon Brown made his speech, OECD Secretary-General Angel Gurría was at pains to make this exact point, urging that “we must ensure that today’s policies to manage the crisis will not be the source of tomorrow’s problems ... Robust competition policy is essential to prevent long-run harm when economic conditions stabilise.”

Brown has announced that he will discuss the matter in more depth with other world leaders during the G20 summit, which is to be held in London in April.

Voicing his opinions on the matter, Brown explained:

“We want the whole of the world to take action. That will mean action against regulatory and tax havens in parts of the world which have escaped the regulatory attention they need. The changes we make will have to apply to all jurisdictions around the world."

Although the governments of developed and highly-taxed jurisdictions across the globe generally oppose their use, tax havens are a popular tool for multinationals keen to reduce the costs, administrative overhead, regulatory red-tape, and bloated governmental bureaucracy that are the hallmarks of wealthy industrialised nations.

Jurisdictions with comparatively attractive tax regimes argue that the global financial landscape already represents a level playing field, and that such moves as the previous OECD blacklist in 2000, far from levelling the field, seek to stack it in the favour of established nations, and to remove the ability of developing nations to compete fairly.

It seems increasingly likely that the growing pressure of a global recession, a corresponding drop in government revenues, and the need for G20 politicians to find a scapegoat will lead to a second blacklist scenario. Many would argue that this will be to the detriment of global trade and international capital flows.

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